Amid the Fed’s aggressive rate hikes, internet stocks have witnessed a substantial decline in investor attention, as evident from the First Trust D.J. Internet Index ETF’s (FDN) 7.8% loss over the past month and 47.5% decline year-to-date.
E-commerce and tech-giant Amazon.com, Inc. (AMZN) has lost 22.9% over the past month and 46.4% year-to-date. Moreover, the company reported mixed financials in its latest quarter. For the third quarter that ended September 30, 2022, AMZN’s total net sales came in at $127.10 billion, up 14.7% year-over-year.
However, its net income decreased 9% year-over-year to $2.87 billion, while its EPS came in at $0.28, down 9.7% year-over-year. In addition, analysts expect AMZN’s EPS to fall 85.6% year-over-year to $0.20 for the quarter ending December 2022 and 102.8% year-over-year to a negative $0.09 in 2022.
Hence, investors could consider quality internet stock, Yelp Inc. (YELP) instead. YELP operates a platform connecting consumers with local businesses in the United States and internationally.
On November 3, 2022, Jeremy Stoppelman, YELP’s co-founder and CEO, said, “As our teams consistently execute against our strategic initiatives, I remain confident in our ability to drive profitable growth and shareholder value over the long term.”
YELP has lost 7.9% over the past year to close the last trading session at $36.34. However, the stock has gained 6.2% over the past month and 10.9% in the past three months.
Here is what could shape YELP’s performance in the near term:
Record Financials
On November 3, 2022, Jeremy Stoppelman, YELP’s co-founder and CEO, said, “We delivered record net revenue, driven by record revenue in our services categories and in our most efficient Self-serve and Multi-location sales channels.”
YELP’s net revenue increased 14.8% year-over-year to $308.89 million for the third quarter that ended September 30, 2022. Its advertising revenue came in at $293.66 million, up 14.3% year-over-year. Also, its adjusted EBITDA came in at $73.94 million, up 4.6% year-over-year.
Favorable Analysts’ Expectations
Analysts expect YELP’s revenue to increase 16% year-over-year to $1.20 billion in 2022. Its revenue is expected to grow 10.1% year-over-year to $1.32 billion in 2023.
In addition, its EPS is expected to rise 34% year-over-year to $0.67 in 2022 and 94% year-over-year to $1.30 in 2023. The stock surpassed EPS estimates in three of four trailing quarters.
POWR Ratings Reflect Promising Outlook
YELP has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Quality. This is justified by its trailing-12-month gross profit margin of 91.45%, which is 81.7% higher than the industry average of 50.32%.
Also, it has a C grade for Stability, in sync with its 24-month beta of 1.16.
In the 61-stock Internet industry, YELP is ranked #2.
Click here for the additional POWR Ratings for YELP (Growth, Value, Momentum, and Sentiment).
View all the top stocks in the Internet industry here.
Bottom Line
Despite widespread macro headwinds, YELP reported record revenue in its third quarter. Moreover, the company’s top line is expected to grow substantially in the current year. Given the stock’s bright outlook, investors could consider buying YELP instead of AMZN this fall.
How Does Yelp Inc. (YELP) Stack Up Against Its Peers?
While YELP has an overall POWR Rating of B, one might consider looking at its industry peers, Expedia Group, Inc. (EXPE), Travelzoo (TZOO), and trivago N.V. (TRVG), which also have an overall B (Buy) rating.
YELP shares fell $2.84 (-7.82%) in premarket trading Friday. Year-to-date, YELP has declined -7.56%, versus a -19.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
1 Internet Stock to Buy Instead of Amazon This Fall StockNews.com
